Stocks Drop on Dour Economic Data

07/30/2020 | 12:04pm

By Anna Hirtenstein and Michael Wursthorn

U.S. stocks fell Thursday on one of the busiest days of the corporate earnings season, while new data laid bare the extent of the economic damage wrought by the coronavirus pandemic.

Most of the stocks in the Dow Jones Industrial Average and all 11 sectors of the S&P 500 were trading lower in recent trading, albeit off their session lows. The retreat followed data showing the U.S. economy saw its biggest-ever quarterly plunge in activity and an uptick in weekly unemployment claims suggesting the recovery in the labor market may be faltering.

Investors largely expected poor economic figures, and the extent of the second quarter's decline in gross domestic product -- nearly 33% on an annualized basis -- came in ahead of economists' expectations. Still, the Commerce Department data confirmed the extent of the pandemic's damage, showing few corners of the U.S. economy were spared.

"When you see that number in print, it becomes a reality," said Bill Northey, a senior investment director at U.S. Bank Wealth Management. "It solidifies the amount of economic damage we have already sustained."

Meanwhile, a tweet from President Trump didn't help matters ahead of Thursday's opening bell. The president suggested delaying the November election until people can safely vote in person, further pressuring stock futures.

Although some investors wrote off the comment, Mr. Northey said it highlighted how the elections remains a major factor that can sway markets.

The Dow industrials fell 297 points, or 1.1%, to 26239, paring losses after falling more than 500 points earlier in the session. The S&P 500 declined 0.8%, and the Nasdaq Composite shed 0.2%.

Some stocks bucked the broader market's decline following upbeat earnings reports, highlighting the handful of "winners" during the crisis.

Shares of United Parcel Service, for example, surged 17% after it reported a record jump in daily shipping volumes. PayPal shares advanced 5.1% after it reported that its revenue and profit beat expectations due to a boom in online shopping and digital payments.

Shares of Kellogg rose 1.4% after the company said consumers shopping for packaged foods, such as cereal, during the pandemic helped drive a key sales metric higher.

Technology giants will take center stage after markets close, with Apple, Facebook, Amazon.com and Google's parent company Alphabet set to release their latest financial results. Those reports will show how tech companies are weathering the economic downturn and may even be benefiting from the lockdown measures. Most of those stocks were trading lower Thursday morning.

"We would say that the results will look more positive than the rest of the market, but a caveat is that expectations are higher as a result," said Raj Shant, a portfolio specialist at an affiliate of PGIM Group. "One overriding factor benefiting tech names is that the digitization of society has been pulled forward by at least a couple of years due to the lockdowns."

Meanwhile, Treasury prices rose, with the yield on the benchmark 10-year bond slipping to 0.549%, from 0.578% Wednesday.

Stocks didn't fare much better overseas, with most indexes falling. The pan-continental Stoxx Europe 600 slipped 2.2% after companies like Volkswagon and Lloyds Banking Group reported weak earnings. Germany also reported that its economy contracted the most on record, shrinking 10.1% in the second quarter.

Beer sales, however, picked up amid the pandemic, sending shares of Anheuser-Busch InBev up 1.9% in recent trading.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com

 

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